Analyst: Apple Took Microsoft By Surprise

American Technology Research analyst Shaw Wu doesnit think that Microsoftis Zune media player poses a big threat to Apple and the iPod, and that pricing and availability information was withheld because Appleis revised iPod caught the company off guard. Microsoft announced the specifications for its Zune music and video player on Thursday, two days after Apple introduced the enhanced fifth generation video capable iPod.

Mr. Wu commented "[Zune] pricing and timing were not revealed likely because our sources indicate that Appleis aggressive pricing at US$249 for its new 30 GB vPod took Microsoft by surprise. We believe Microsoft is re-thinking its pricing strategy amid potential wider losses to stay competitive in the marketplace."

The Zune player specifications didnit offer any features that make the product stand out from the competition. On that point, Mr. Wu said "We remain under whelmed with the much-hyped Zune, which is essentially a repackaged Toshiba Gigabeat, with limited differentiation vs. existing Windows Media devices."

Unfortunately for Microsoftis partners in the digital music player market, Apple will remain essentially unscathed while they take the brunt of the Zuneis market impact. Companies like Creative, Archos, SanDisk and iRiver will see their marketshare erode as customers buy the Zune instead of other iPod competitors.

Mr. Wu is maintaining his "Buy" rating for Apple with a target price of $91. Apple stock is currently trading at $73.81, down 0.36 (0.49%).